China’s Exporting Cold Water

The China economy story at the end of the first quarter was slower growth but signs of an uptick in the March data.

Trade numbers for April throw cold water on that theory.

Growth in exports fell to 4.9% year-to-year, down from 8.9% in March. Exports to the troubled European Union were especially weak, shrinking 2.4% year-to-year.

It’s no surprise that the world is not buying as much of China’s exports. But import data also disappointed. Growth of 0.3% year-to-year was the lowest outside a holiday month since the dark days of the financial crisis in October 2009.

A 4.1% year-to-year fall in imports of components to the export processing trade suggests China’s manufacturers are destocking in anticipation of weaker demand.

More worryingly, commodity imports were also lackluster, with iron ore and copper both down month-to-month. That likely suggests the slowdown in China’s real estate sector is eating into its demand for raw materials.

April’s industrial output data, expected Friday, will provide a clearer read on the direction of China’s growth. But based on the trade numbers, the expected second quarter recovery has yet to arrive.